Ecommerce Isn't Killing Shopping Malls As Much As Newer Malls Are

People still like to shop and view it as a popular leisure time activity. Amazon's move into physical retail underscores the economic and social power of  the personal shopping experience.

But overbuilding of malls and failures to reimagine shopping centers' retail mix have made it more difficult for malls is secondary locations or with a less contemporary offering of stores to survive, especially given the challenge of ecommerce as an alternative. JL

Esther Fung reports in the Wall Street Journal:

Internet retailing is eating into mall revenue, but competition from newer shopping centers was the most common cause of death for malls over the past decade. Relocation of an anchor department store from the weaker property to the newer mall was a tipping point for the downfall of the weaker mall. Weak malls are typically the fourth or fifth mall in a town with a population insufficient to support that much shopping.
Internet retailing is eating into mall revenue, but competition from newer shopping centers was the most common cause of death for malls over the past decade, according to a study of 72 such properties.
While the situations were different, the dead malls generally struggled to compete with newer malls that offered more modern features and a broader selection of stores, according to Wells Fargo Securities, whose database covers about 1,000 malls.
The dead malls were built in the mid-1970s and were overtaken by larger malls built from the late 1970s to the early 1990s that better capitalized on demographic and transportation shifts.
One common hallmark of a dead or dying mall is the closure of an anchor store. When that happened, fewer customers tended to visit, resulting in more store closures, which led to even fewer shoppers, and so on.
“Relocation of an anchor department store from the weaker property to the newer mall was a common tipping point for the downfall of the weaker mall,” said Jeffrey Donnelly, senior analyst at Wells Fargo Securities. He said weak malls are typically the fourth or fifth mall in a town with a population insufficient to support that much shopping.
Of the 72 malls that closed, 23 were redeveloped into other types of retail property, such as strip centers or open-air shopping centers, while 18 were reused as civic centers or converted into residential towers or industrial or office campuses.Plans for the remaining 31 malls have yet to be determined, though most of them already have been demolished. The average dead mall was about 752,000 square feet, compared with the 1.2 million square feet for an average class-A mall and the average 910,000 square feet of a class-B mall.
Ohio suffered the most mall closings—six, in Akron, Canton, Columbus, North Randall, Northwood and Toledo—followed by Texas and Missouri, with five each.
Landlords have grappled with numerous threats over the years. Two decades ago, Blockbuster was eating into the revenue of movie chains, while big-box stores were battering smaller stand-alone retailers, noted Sandler O’Neill Partners analysts in a recent report.
This time, factors such as consumers being more thoughtful about their purchases after the recession, the overbuilding of retail centers and retailers’ focus on investing in more online shopping channels are pressuring mall landlords.
Property owners generally try to court trendier brands and avoid outdated retailers. In recent years, they have started shaking up their tenant mix more radically, moving away from full-price apparel brands and toward entertainment and food offerings.
That is resulting in a more dramatic separation of the strongest and weakest malls, with top-tier malls in cities with strong population and income growth receiving more investment and weaker malls suffering from neglect.
When developers build a mall, they generally expect it to serve the community for 40 years or longer, according to the International Council of Shopping Centers. The Southdale Mall in Edina, Minn., for instance, celebrated its 60th anniversary last October. NorthPark Center in Dallas and South Coast Plaza in Costa Mesa, Calif., recently turned 50.
“Malls view themselves as community hubs, and as market shifts occur, mall owners throughout the industry have effectively curated new customer offerings to meet changing consumer behaviors and expectations,” said Tom McGee, president and chief executive officer at the ICSC.